Posted by: Brian Powers | March 23, 2010

Foreclosure rights often unknown to Michigan renters

If you’re currently renting make sure you understand your rights under the 2009 Protecting Tenants at Foreclosure Act. In the event your landlord loses the property to foreclosure you do have some rights and it’s important to know what they are.

Foreclosure right often unknown to Michigan renters

CHRISTINE FERRETTI
The Detroit News

Warren — Rebecca Papiez felt blindsided this month when told the home she’s been renting is in foreclosure and she has 30 days to relocate with her quadriplegic husband and three young children.

Until then, the 28-year-old tenant said she hadn’t received a call, letter or visit informing her of any problems with the Warren home near 12 Mile and Ryan, which has ramps and an open floor plan for her husband, Matthew, who uses a wheelchair due to a catastrophic work injury. The family’s $1,450-a-month rent had been paid on time for nearly three years.

The situation, relayed to the family by their property manager, seemed grim. But after briefly consulting with a housing assistance group, Papiez learned she should have at least until July to relocate under guidelines of federal legislation enacted last year.

The newfound knowledge brought some comfort, but Papiez still feels vulnerable.

“It relieved me a lot to know more about my rights,” she said. “He (the landlord) pulled the wool over our eyes.”

Experts say the family’s story is unfortunate, but it’s not uncommon: Tenants are often unaware of their rights when faced with foreclosure proceedings.

Jim Schaafsma, a housing attorney for the Ann Arbor-based Michigan Poverty Law Program, said the May 2009 Protecting Tenants At Foreclosure Act offers renters a little help in a state where their options are “sorely lacking.”

“Michigan has nothing other than basic protection that all tenants enjoy. There’s nothing specific to tenants in foreclosed properties,” he said. “It’s great for Michigan that there’s this federal law that offers them some protection, but it’s of little value if they don’t know about it.”

Under the act, tenants are entitled to 90 days’ notice from the new owner after the “redemption period” following a foreclosure sale. During the six-month redemption period, the borrower can redeem the property by paying off the amount owed. If not, the title goes to the new owner.

Still, the new property owner cannot legally evict tenants before necessary court proceedings.

Renters represent a significant but sometimes hidden portion of the population affected by foreclosure, according to local housing advocates.

Ted Phillips, executive director of the Detroit-based United Community Housing Coalition, estimates about one-third to half of their current clients are tenants of foreclosed landlords.

“The bulk of our work is not with tenants in foreclosure,” he said, “but we’re seeing a bigger increase in people coming through here because their landlord lost the property through mortgage foreclosure.”

Data released this month from RealtyTrac show 20,028 Michigan properties were the subject of foreclosure filings in February. The number is up 59 percent from the same time last year.

In February, foreclosures in Oakland County rose 71 percent from February 2009. Foreclosures in Wayne jumped 69 percent, and in Macomb by 53 percent, RealtyTrac data shows.

One pilot program, in Detroit is aimed at keeping renters and homeowners in foreclosed properties longer. By keeping homes occupied, the plan is expected to reduce blight and the vacancies.

The Retaining Occupancy On Foreclosure, or ROOF, agreement is designed to extend the amount of time a tenant or landlord can spend in a foreclosed property under controlled conditions with the new owner, said Mitch Meisner, a Detroit-based commercial real estate lawyer who helped draft the plan.

Meisner said ROOF would give renters an additional three months in the property after the six-month redemption period and 90 days permitted under federal law.

Tenants would be responsible for routine maintenance and basic utilities. They’d also pay an “availability fee” that would go into an escrow account to be split between the tenant and lender when the agreement terminates.

In Papiez’s case, documents show the landlord lost the home at a sheriff’s sale on Sept. 11 for $115,658. The landlord retained the right to collect rent until March 11, when the six-month redemption period expired.

“It just burns me that he could do this to a family with a disabled person,” she said. “It’s ridiculous.”

Additional Facts

Before you rent

  • Check for any outstanding taxes on the property with the county register of deeds
  • Look into the status of the property title; if there’s been a sheriff sale, it should be filed
  • Talk with neighbors. Find out who had been living in the home or apartment and what the turnover is like.
  • Consult with a housing advocate, attorney or counseling agency to learn the steps of foreclosure and your legal rights.
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